The number of retail investment advice firms in the UK has fallen by 7 per cent, according to data from the Financial Conduct Authority.
A Freedom of Information request to the FCA, submitted by FT Adviser, revealed the number of firms authorised to provide retail investment advice has fallen from 6,240 in August 2022 to 5,805 as at February 2024.
This means 435 firms have disappeared from Britain, and represents a drop of 7 per cent in as little as 18 months.
Darren Cooke, chartered financial planner at Red Circle Financial Planning, described this as “quite a reduction".
It seemed that consolidation was the explanation for this drop in firms, with figures from M&A specialist IMAS stating a rise in consolidation.
The January report said "M&A volumes in the investment sector picked up where they left off in 2023 with continuing high levels of activity in the wealth management sector."
It highlighted several high-profile acquisitions, including:
- Söderberg & Partners buying minority stakes in three firms: Bath-based Fidelius with £2bn of client assets; London-based Vintage Wealth Management with £1.1bn of client assets; and Croydon-based PK Financial with £150m of client assets
- Finli Group, formerly known as Solomon Capital Holdings, acquiring Glasgow-based IFA Clark Gillone, adding £815m of client assets
- Prosperis buying Newcastle-based IFA Stephen McDine, adding £450m of client assets.
But Cooke questioned whether such consolidation activity was a good thing for both advisers and their clients.
He said: “An awful lot of money is going to get sucked out of the profession over the next few years to service the debt to those PE firms and that is only coming from one place: clients' pockets.”
Likewise, Mark Ormston, director of propositions and corporate partnerships at Retirement Line, said the figures felt reflective of the amount of consolidation happening in the advisory market.
He added: “Naturally, there are many reasons why someone might consider selling their business or retiring from the industry.
“With this said, it feels fair to say, based on conversations I have had with some advisers in recent years, changes in regulations may have aided their decision to sell or retire. However, this decision is very much down to each individual's feelings and circumstances.”
Elsewhere, Simon Harrington, head of public affairs at Pimfa, said he believed the driver behind the drop in numbers could have been the Covid pandemic.
“Clearly, it is disappointing that the number of directly authorised firms has fallen over the last two years,” he said.
“In the main, we consider that the primary driver here is firms closing as a direct result of the lingering effects of the Covid-19 pandemic, either through direct sale or broader consolidation.
“In this context, it is also important to note that the average age of financial advisers in the UK remains high, and, as a result, some turnover is expected.”
Shifts in advice
Steve Gazard, chief distribution officer at Quilter, said the figures reflect the consistent shifts that take place in the financial advice landscape, which are driven by factors such as regulation, technology, consumer demand, and market conditions.
He added that the numbers only tell part of the story because networks count as a single firm and appointed reps do not show up in adviser firm numbers.
